On July 10, 2015, the FCC issued a Declaratory Ruling and Order (the Order)
interpreting the Telephone Consumer Protection Act (TCPA). The Order received
much attention in the financial industry press and key aspects were highlighted
in numerous law firm bulletins. For those with daily exposure to TCPA
requirements, the repercussions of the Order were readily apparent. For
others, however, the publicity was likely akin to the hoopla surrounding
the finale of
Downton Abbey—you know it’s a big event for some, but that’s where
your knowledge ends unless you’ve been watching the show. Unlike
Downton Abbey, however, the TCPA isn’t fiction and the heightened risk of violations
and very real associated severe financial consequences[1] warrant taking the time to learn more.

That Was Then…

The TCPA was signed into law by President George H. W. Bush in 1991 with
the primary goal of protecting consumers from an ever-increasing barrage
of unsolicited telemarketing calls and advertisements delivered via facsimile machine.[2] The following statement of Senator Ernest “Fritz” Hollings
captures the prevailing sentiment of the day:

“Computerized telephone calls are the scourge of modern civilization.
They wake us up in the morning; they interrupt our dinner at night; they
force the sick and the elderly out of bed; they hound us until we want
to rip the telephone right out of the wall. . .” 137 Cong. Rec.
at S16205-S16206 (November 7, 1991).

Read 25 years after they were made, Senator Hollings’ comments additionally
shed light on the current displeasure within the financial services industry
over the FCC’s recent interpretations of the Act’s requirements
for calls to cell numbers. Those requirements are more demanding than
the Act’s corresponding requirements for calls to residential (i.e.
line-based) numbers. In considering this disparity, keep in mind that
in 1991 the “cellular telephone,” as it’s referred to
in the Act, was still a novel business tool versus a staple of everyday
life. Hence, the impact of the rules governing calls to cell numbers was
relatively limited. Furthermore, because the cost per call for early users
of cell phones was a lot higher than what users pay now, the rules protected
consumers against likely economic harm in addition to safeguarding their privacy.[3]

…This is Now

Today, cell service is quickly supplanting traditional line-based service
as the sole form of telephone service for the majority of consumers’.[4] Given this ongoing migration of consumers to cell-only service, coupled
with changes in how cell services are structured in comparison to in 1991
(e.g. unlimited calling plans have become the norm), many in the industry
had hoped the FCC would interpret the Act in a way that struck a more
equitable balance between the economic interests of callers and the privacy
interests of consumers. As a result of the Order, however, the risk of
violating the TCPA from calls to cell numbers is plainly and substantially higher.

Prior Express Consent

Calls

The need to obtain “prior express consent” from the called
party is an important requirement of the TCPA. For calls placed to cell
numbers using an Automated Telephone Dialing System (i.e. autodialer)
or an artificial or pre-recorded voice, such consent is necessary for
all but a narrow band of exempted calls.[5] In addition, for calls to cell numbers that constitute telemarketing or
that include or introduce advertising, consent must be: (i) in writing,
and (ii) obtained in compliance with rules, which mandate the provision
of certain disclosures that define what constitutes valid consent.

For non-marketing calls to cell numbers, neither the TCPA nor the FCC’s
implementing regulation establish specific rules for prior express consent.
To this end, the FCC has consistently stated that a consumer has consented
to receive autodialed calls and calls using a pre-recorded or artificial
voice to their cell number if they included that number in their application
for credit.[6] Regarding the latter, the FCC advises creditors to “include language
on credit applications and other documents informing the consumer that,
by providing a wireless telephone number, the consumer consents to receiving
autodialed and prerecorded message calls from the creditor at that number.”

Finally, the Order clarified that consumers may revoke consent by any reasonable
means, which cannot be restricted by the caller; e.g. it would be impermissible
for a caller to attempt to restrict revocation by requiring the consumer
to submit their request via email, text message, or fax sent to a designated number.

Texts

The Order also reiterates that text messages are subject to the same requirements
as voice calls. When one considers that the recipient of a text message
may postpone reading it until a convenient time of their choosing, this
position seems at odds with Congress’ goal of curtailing unsolicited
communications that disturb consumers in their sleep, interrupt their
dinners, or rouse them from their sick beds. On the other hand, unsolicited
texts consume available data and increase the possibility that consumers
will incur surcharges from their wireless carriers. As noted earlier,
in recognition that certain “pro-consumer” unsolicited text
or voice messages confer a net benefit to consumers, the Order establishes
a limited number of conditional exemptions.

Residential Numbers

By its terms, the TCPA requires prior express written consent for all calls
to residential numbers made using an autodialer or using a pre-recorded
or artificial voice. However, the Act also authorizes the FCC to exempt
categories of calls by regulation. Since its inception, the FCC’s
regulation has included an exemption for calls made to a residential number
for “any commercial purpose” (including debt collection) that
does not include or introduce an advertisement or constitute telemarketing.
If the call includes such marketing, then express written consent must
be obtained in accordance with the same rules that govern marketing calls
to cell numbers.

Prior Express Consent – At A Glance

Verbal or written prior express consent must be obtained, subject to specified
narrow exceptions, for any calls placed to cell numbers made using an
autodialer or an artificial or prerecorded voice

Making calls to residential numbers using an autodialer or using a prerecorded
voice does not trigger the need to obtain either verbal or written prior
express consent

Written prior express consent must be obtained (i.e. verbal consent will
not suffice) for any calls (whether to cell or residential numbers) that
constitute telemarketing or that include or introduce advertising

Autodialer Defined

In theory, the FCC could narrow the difference between the respective rules
for calls to cell numbers and calls to residential numbers through its
interpretation of what constitutes an autodialer, which is defined in
the TCPA as follows:

The term ‘automatic telephone dialing system’ means equipment
which has the capacity:

(A) To store or produce telephone numbers to be called, using a random
or sequential number generator; and

The Order, however, provides that “capacity” as used in the
definition should be construed broadly to include any dialing equipment,
combination of separate equipment, or combination of equipment and software,
which has the “potential ability” to store and dial numbers
randomly or sequentially without human intervention, even if the party
who controls the equipment has no plans to use it that way. In discussing
the rationale for this conclusion, the Order notes that the FCC considered
and rejected industry suggestions that the definition might be read to
exclude equipment which could only function as an autodialer after making
technological modifications. In addition, the Order reiterates the FCC’s
previously-stated position that a predictive dialer constitutes an autodialer
even if it is only used to dial numbers from fixed lists, and clarifies
that equipment used to originate Internet-to-phone text messages to wireless
numbers (whether via email or a wireless carrier’s web portal) constitutes
an autodialer.

Reassigned Cell Numbers

The Order also addresses the situation where a cell number has been reassigned
to a different subscriber. Specifically, the Order provides that a caller
may call the reassigned number no more than once in good faith to gain
actual or constructive knowledge of the reassignment. Many in the industry
have questioned the feasibility of this “one call” standard
given the ever-increasing prevalence of cell phone usage and attendant
higher volume of reassignments.

On the positive side of the equation, the Order outlines seven steps that
callers should consider implementing to increase their chances of learning
about changed or reassigned cell numbers:

Include an interactive opt-out mechanism in all artificial- or prerecorded-voice
so that recipients may easily report a reassigned or wrong number;

Implement procedures for recording wrong number reports received by customer
service representatives placing outbound calls;

Implement processes for allowing customer service agents to record new
phone numbers when receiving calls from customers;

Periodically send an email or mail request to the consumer to update his
or her contact information;

Utilize an autodialer’s and/or a live caller’s ability to recognize
“triple-tones” that identify and record disconnected numbers;

Establish policies for determining whether a number has been reassigned
if there has been no response to a “two-way” call after a
period of attempting to contact a consumer; and

Enable customers to update contact information by responding to any text
message they receive, which may increase a customer’s likelihood
of reporting phone number changes and reduce the likelihood of a caller
dialing a reassigned number.

In addition to the above, the Order suggests that callers consider adding
a contractual commitment to the terms of prior express consents requiring
the customer to provide notification of any change in their phone number.
Unfortunately, the Order also clearly provides that none of the foregoing
preventative measures establishes a safe harbor against violations of
the Act. Yet, there are other compelling reasons for implementing these
measures notwithstanding the lack of a safe harbor, including their potential
value in deflecting allegations of willful or knowing misconduct and the
attendant possibility of civil forfeiture or criminal fines.

Lastly, in light of the FCC’s positions, and the rapid pace of consumers’
transition to cell-only phone service, callers who are not already doing
so should strongly consider seeking additional prior express consents
from existing customers. In this regard, the Order cautions that although
the transfer of a number from residential service to cell service does
not terminate any consents the customer may have previously provided,
additional consent may be necessary which was not required when the number
was residential (e.g. a non-marketing call made using an auto-dialer or
artificial or pre-recorded voice).[8]

How Bridgeforce Law Can Help

Bridgeforce Law can assist you in the assessing the current state of your
firm’s compliance with the TCPA We work with a variety of banks,
ranging from the nation’s largest financial institutions to community
banks, to arrive at solutions that are both technically compliant and
practical in operation. To this end, we frequently call upon industry
consultants when real-life, deep operational experience will facilitate
long term, sustainable compliance.

[1] The Act provides a private right of action and successful plaintiffs may
recover actual damages or statutory damages of $500 per violation and
treble damages for willful or knowing violations. Multiple violations
may result from multiple calls to the same consumer; i.e. a plaintiff
that received 100 unlawful calls could recover as much as $150,000 in
statutory damages. In addition, the FCC may levy civil forfeitures of
up to $10,000 per violation, not to exceed a total of $1 million for any
single act or failure to act. Finally, upon conviction, criminal fines
of up to $30,000 per violation per day may be imposed for continuing willful
or knowing violations. 47 U.S.C. §§ 227(b)(3), 227(e)(5)(A),
and 227(e)(5)(B).

[4] According to a 2015 market research study conducted by GfK-MRA, as of
year-end 2014:

44% of US households only had cell phone service and nearly 64% of young
adult Millennials (born 1977-1994) only had cell phone service.

[5] The Order established a conditional exemption for calls or text messages
concerning: (i) transactions and events that suggest a risk of fraud or
ID theft, (ii) possible information security breaches, (iii) steps that
consumers can take to prevent or remedy the harm caused by a security
breach, or (iv) actions needed to arrange for receipt of pending money
transfers. In order to qualify for exemption such call or text: (i) must
be sent only to the cell number provided by the customer, (ii) must state
the name of the institution, (iii) cannot include any debt collection
or marketing content, (iv) should be under one-minute for calls or under
160 characters for texts, (v)cannot exceed more than three calls or texts
over a three-day period, and (vi) must include an “easy” mechanism
for opt-out.